United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2007] UKVAT(Excise) E01072, [2007] UKVAT(Excise) E1072

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Montesole UK v Revenue & Customs [2007] UKVAT(Excise) E01072 (07 November 2007)

E01072

EXCISE DUTY and VAT — appellant wholesaler and retailer of wines — importation of quantities of wine from Italy — appellant named as consignee in CMRs — whether goods consigned delivered to appellant — no — appeal allowed

EXCISE DUTY CIVIL PENALTY — falls with assessments to excise duty — appeal allowed

MANCHESTER TRIBUNAL CENTRE

MONTESOLE UK Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack

Arthur Brown FCA, CTA

Sitting in public in Manchester on 16 July 2007 and 28 September 2007

Richard Barlow of counsel for the Appellant

James Puzey of counsel instructed by the General Counsel and Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

In 2001 and 2002, the appellants, John Pleasants and Frank Piotrowicz, traded in partnership under the style of Montesole UK ("Montesole UK") from premises in Bradford. They imported wines, aperitifs and specialist liqueurs from Italy and sold them in the United Kingdom. On 21 March 2002, as a result of an important administrative document being missing from the paperwork, Her Majesty's Commissioners for Revenue and Customs ("the Commissioners") detained a lorry load of goods entering the UK from Italy, including wines and spirits consigned to Montesole UK. The Commissioners then made enquiries about other importations said to involve the same consignor, Impex Import-Export di Bikram Singh ("Impex"), and Montesole UK. They found documentation relating to four such importations: one each in September, November and December 2001 and one in February 2002, on none of which duty had been paid. (For convenience we shall refer to each importation by reference to the month in which it is said to have been shipped.) Initially, they assessed excise duty and VAT on all the importations but the February one, the assessments being made against both Montesole UK and Bikram Singh, the proprietor of Impex. Montesole UK and Bikram Singh required the Commissioners to review their decision to assess excise duty, that being a pre-requisite to an excise duty appeal to these tribunals. Unfortunately, the Commissioners failed to carry out the review within the statutory time limit so that the excise duty assessment was deemed to be confirmed. (Notwithstanding that the Commissioners failed to carry out the requested statutory review of the excise duty assessment, on 19 June 2003 they did complete a review confirming the decision to assess to duty). Both Montesole UK and Bikram Singh then appealed the deemed decision on review to assess excise duty in the sum of £72,804.87, an assessment to VAT of £12,740, and an assessment to an excise duty civil penalty of £3,640.24. Later, the Commissioners assessed the excise duty due on the February importation in the sum of £28,363.61, which was upheld on review. They also assessed it to VAT of £4963. Again they imposed an excise duty civil penalty, on this occasion in the sum of £1,418.18. With the consent of the tribunal, Montesole UK's appeal was extended to cover the new assessments.

As it is central to the appeal, we should explain that at the time with which we are concerned Impex was, as its name clearly indicates, the import / export vehicle of Bikram Singh. Bikram Singh is a British citizen who operates an off-licence shop in Bradford. Subsequent to lodging his appeal, he was adjudicated bankrupt, and his trustee in bankruptcy decided not to pursue his appeal. However, had Bikram Singh wished to clear his name, there is no reason why he should not, with his trustee's consent, have pursued the appeal. He chose not to do so.

In reaching their earlier decision to assess, the Commissioners, by their assessing officer, stated in a letter to Montesole UK of 7 March 2003 that they had taken the following points into consideration:

"( On 21 March 2002, Customs & Excise at Dover detained 6876 litres of wine. You were willing to accept responsibility for the wine and make arrangements for it to be delivered into your account at Rarter Limited. This load was travelling on a CMR note having similar information to those CMR notes, which form the basis of our assessment. The consigner of the goods was Impex Import-Export, the consignee Montesole UK, and the delivery address Mont Street, Bradford.

I have spoken with the Italian haulier, Mr. Rosche of Frisinghelli Logistica, Verona, Italy. He confirmed that the goods on the CMRs were delivered and receipted at Mont Street (the Mount Street address in Bradford). This premises is not approved for the receipt and storage of UK duty suspended excise goods.

On 8 April 2002 I visited your warehouse premises at Mount Street, Bradford. The warehouse is of a large size and is not consistent with your declared business activity of selling food and wines at continental markets. At the time of our visit the premises was almost empty.

On 29 April 2002 I visited Mr. Pleasants at his home address and examined the business records of Montesole UK. Within the records I found a number of invoices relating to fork lift truck hire. The dates of the hire coincided with the dates shown on the CMR notes. I also found an original letterhead from Impex Import-Export, indicating some association with that company.

We have received information relating to a further consignment of wines and spirits having been imported into the U.K. during February 2002. However, we have been unable to obtain a copy of the CMR note for this load and it has not been included in the calculation for assessment purposes."

In Montesole UK's notice of appeal of 15 July 2003, it gave the following reasons for appealing:

"We have not ordered, paid for, received, sold and not received any payment for any of the goods in question. We have not instructed any transport company to transport the goods to this country or paid any transport company. We think that Impex of Piza have."

The only questions for our decision are whether Montesole UK did receive the goods consigned to it, in which case it is liable for the excise duty and VAT assessed; and, if it did, whether it has a reasonable excuse for the penalty assessments.

For completeness, we set out the applicable excise duty law in the Schedule to our decision.

Before us Montesole UK was represented by Mr Richard Barlow of counsel, and the Commissioners by Mr James Puzey, also of counsel. They presented us with a bundle of copy documents, and we took oral evidence from Mr Pleasants, Mr Piotrowicz, and Richard Lamb, an officer of the Commissioners. We found all three witnesses to be men of truth, so that we accept their evidence of fact. On the basis of all the evidence, we add the following findings of fact to those outlined in paragraph 1 above.

Mr Piotrowicz and Mr Pleasants formed the Montesole UK partnership late in 1999 or early 2000, shortly after Mr Pleasants was made redundant by Yorkshire Water. They have been friends for some years. As we have already mentioned, Montesole UK imported wine from Italy. It acted as a wholesaler, dealing mainly with restaurants, and as a retailer at continental wine fairs. Montesole UK took its name from an eponymous firm exporting wine from Italy in which relatives of Mr Piotrowicz had an interest and with which the UK arm regularly dealt. But it also dealt with other Italian exporters. Montesole UK traded on a small scale, importing wine in quantities of three or four pallets. It ceased trading in 2004.

Mr Piotrowicz, who is of Italian extraction and speaks Italian, concentrated on purchases, sales and marketing, leaving Mr Pleasants to deal with administration and the keeping of records. The firm had no employees, and was based at 4 Westcliffe Road, Shipley, Mr Piotrowicz's mother's home. Although the business started in a small way, it expanded, so much so that Montesole UK decided to rent premises in which to store wines and to serve as an office. As part of the expansion programme, on 30 August 2001 it applied to the Commissioners for approval to become a registered excise dealer and shipper (REDS). The application was granted in April 2002 (and subsequently revoked in March 2003).

On 21 March 2002, the Commissioners' Dover Detection Discreditation Team ("DDT") detained a consignment of 31 pallets of wine, 270 bottles of liqueurs and 60 items of confectionery being imported into the UK from Italy. They did so because the driver of the lorry transporting the goods had no Accompanying Administrative Document ("AAD"), the consignor was not an authorised warehouse (so that UK duty should have been prepaid), and there was no evidence of prepayment of duty. (An AAD is required to confirm either that excise duty on a consignment has been paid or will be accounted for to the satisfaction of the revenue authority). The driver did, however, have an international consignment note ("CMR") dated 19 March 2002. It showed that the goods were dispatched by Impex and consigned to Montesole UK. The destination given was Montesole UK, 4 Westcuffe (sic) Road, Shipley, West Yorkshire BD18 3EE, and the delivery address as Warehouse Mont Street, Mius, Bradford BDB 9RJ. (That address should have read Warehouse Mount Street Mills, Bradford BD8 9RJ).

As Montesole UK was not then licensed to receive and store UK duty suspended goods, all the wines and spirits it imported had to be transported direct to a bonded warehouse. Rarter Ltd of Leeds / Bradford Airport Industrial estate had such a warehouse which Montesole UK invariably used to store its wines and spirits. When Montesole UK withdrew stocks from Rarter Ltd, the duty and tax due on them was, by arrangement with the Commissioners, debited to its bank account.

The goods transported and detained by the Commissioners on 21 March 2002 were listed on the CMR as:

16 pianali [pallets] vino 10920 kg

15 pianali vino 13800 kg

270 bottiglie liquore

60 confezione colatione 390 kg

Written in manuscript on the CMR in a box reserved for 'Documents annexed' was:

"Phone 3404116771* Mr Antonio or

01274 743773 Domenico"

(*This is an Italian mobile phone number)

The Commissioners also found printed delivery instructions for the lorry driver in the following terms:

"Per TransItaly

Itinerario Da Seguire

Da Dover Seguire l indicazione per la M25 direzione Heathrow – Dartford Tunnel

Una volta sulla M25 direzione Heathrow esci all uscita 21a M1 north (NORD)

Prosegui sulla M1 north (NORD) fino all uscita n 42 la quale ti portera' sulla M 62

Direzione BRADFORD-MANCHESTER

Dalla M62 WEST (ovest) esci all'uscita n 26 che ti porta sulla M 606

Una volta sulla M 606 parcheggia sulla corsia d'emergenza e telefona ai n tel.

340 4116771

01274 743773 e chiedi di ANTONIO o DOMENICO"

We shall return to those instructions later in our decision.

Montesole UK came into contact with Impex when, in 2000 or 2001, Mr Piotrowicz visited a wine fair in Verona. There he met an Italian representative of Impex who provided him with information about the firm and the wines in which it dealt. In return he handed the Italian a Montesole UK business card and 'with compliments' slip. Neither Mr Piotrowicz nor Mr Pleasants ever met Bikram Singh. There is no evidence of Montesole UK having placed an order with Impex before February 2002 when it ordered by telephone 10 pallets of Merlot wine for delivery in the United Kingdom in April 2002. The order was much larger than Montesole UK's usual orders as Impex had agreed to make sales at a concessionary rate for orders of 10 pallets of wine or more. As delivery of the wine was not due until April, Montesole UK had not in March 2002 made arrangements with Rarter Ltd for its storage. Montesole UK was to be invoiced for the wine by Impex.

On Impex being informed by the Commissioners that on 21 March 2002 they had detained the goods detailed at paragraph 10 above, its representative telephoned Montesole UK and asked it to arrange for all the wine included in the consignment to be put in bond as he claimed it included 10 pallets destined for Montesole UK. (The Commissioners seized the spirits in the load, and neither they nor the confectionery play any further part in events with which we are concerned). Even though Montesole UK arranged for the wine to be transferred to Rarter Ltd, that proved insufficient to persuade the Commissioners to release it. They required Montesole UK to satisfy them that it would be responsible for the excise duty due on all the wine. Montesole UK agreed to the Commissioners' condition, and made the necessary arrangements for future payment of the duty. Unknown to Montesole UK at that stage, the 10 pallets of wine consigned to it were neither the type nor the quantity it had ordered. The Commissioners then allowed the wine to be transported direct to Rarter Ltd. Subsequently, as Montesole UK proceeded to withdraw and sell it, it paid the duty and tax due. Montesole UK was never invoiced for the wine; and, perhaps not surprisingly in all the circumstances, it seemingly treated it as having been abandoned.

The Commissioners subsequently caused enquiries to be made into other importations of goods showing Impex as consignor and Montesole UK as consignee. They revealed the four importations to which we referred in paragraph 1 of our decision. Essentially, apart from the contents of each load and the sub-transporter, the five CMRs relating to those importations (there were two CMRs for the November importation) were in very similar form: the consignor was Impex Import-Export; the consignee was Montesole UK; the delivery address was Warehouse Mont Street, Mius, Bradford BDB 9RJ; the place of departure from Italy was San Donato / San Miniato; and the transporter was TransItaly Depositi srl. The actual transporter, i.e. the subcontracted transporter, of the first and third loads was Edinpex doo of Slovenia, of the second load, Frisinghelli Logistica of Verona, Italy, and of the fourth and fifth loads, Quehenberger Logistik AG of Austria.

The evidence indicated, and we accept, that the goods referred to in the CMRs were included in "groupage" loads, i.e. formed parts of loads destined for a variety of consignees. The CMRs indicated the parts of the loads consigned to Montesole UK to consist of the following items:

18.09.01: 28 Palette – nr 1.540 Carteni – Vino 24.000 kgs

08.11.01: (a) Bottiglie 3564 Vino Pianali 6 5180

Bottiglie 3600 Liquore (Ron Bacardi

/Vodka) pianali 8 4360

(b) 3 palette bicchieri vetro

3 divani in pelle

4 poltrone in pelle

5 sedie in legno

4 Lavamani Kg. 260

10.12.01: Vino PL.29 20440

Liquori PL.2 1565

Caffe' Macch per Caffe' Tazzine PL1 215

05.02.02: 22 Palette Vino 17800 kg

5 Palette Liquori 3000 kg

We observe that the second CMR for the November consignment relates mainly to items of furniture, and that for the December consignment includes a coffee machine.

On each CMR is a box intended for the signature of the person receiving the goods consigned on behalf of the consignee, and the date of signature.

The signature box in the February CMR is blank and, since no other evidence of importation of the February consignment and its delivery was adduced, even if we are satisfied of its importation, we are faced with no direct evidence whatsoever of its delivery to Montesole UK. The only evidence of delivery of the February consignment to Montesole UK is thus circumstantial.

The two photocopy CMRs for the November consignment produced to us are of the poorest quality, and on both almost all of the signature of the person who is supposed to have received the goods on behalf of Montesole UK is missing: the signatures are thus illegible. In relation to the November importation by fax of 14 January 2003 to the Commissioners, Claudio Simone of Frisinghelli explained that his firm "loaded Montesole on behalf of another international forwarder TransItaly sri". He also said, "I've never spoken directly with Montesole [UK]" and "We got paid by TransItaly". It will be recalled that in the second bullet point of the letter of 7 March 2003 (see paragraph 3 above) the assessing officer said that Mr Rosche of Frisinghelli had "confirmed that the goods on the [November] CMRs were delivered and receipted at Mount Street". In the absence of a signed CMR for the November consignment, we do not accept that Frisinghelli obtained "confirmation" of its delivery and, unless Mr Rosche himself was the delivery driver (which we doubt), he could not say that the consignment was delivered to Montesole UK. In those circumstances, again even if we accept the CMRs as evidence of importation into the UK, the only evidence of delivery of the two consignments to Montesole UK is circumstantial.

Montesole UK having taken delivery of the March consignment, we may ignore the CMR for that importation, which leaves us to consider the CMRs for the September and December importations. Those documents contain what appear to be two different signatures in the signature boxes. It was put to Mr Piotrowicz in interview that the signature on one CMR – the interview notes do not record which – resembled his own. He simply denied that it was his signature, and there matters rested. On the evidence available to us, we are not prepared to find that either signature was that of Mr Piotrowicz, or for that matter of Mr Pleasants, since he too denied signing CMRs. (Whilst the burden of proof is on Montesole UK, it could have considerably helped the Commissioners's case had they produced a copy of Mr Piotrowicz's original interview statement containing his signature (see paragraph 39 below). As it is, we were merely provided with a typed copy of his statement which was, of course, unsigned). We thus have two CMRs on which there are signatures in the receipt boxes, but no evidence of whose signatures they are. So that, yet again, the only evidence of delivery to Montesole UK is circumstantial. None of the four pre-March importations was delivered to Rarter Ltd.

Mr Puzey made much of the incorrect spellings of Montesole UK's business and delivery addresses on the CMRs. We accept that there were errors in those addresses, but they take matters no further.

Amongst the documents obtained by the Commissioners were two manuscript notes on TransItaly notepaper containing instructions to the lorry drivers carrying goods consigned to Montesole UK as to what they should do on reaching the M606 motorway – the motorway giving access to Bradford from the M62. The body of each note is identical. Indeed, it is quite plain that part of one is a photocopy of part of the other. As the overall layout of the two notes is quite different, we assume that they relate to separate deliveries. As we know of instructions relating to the November and March consignments, those notes must refer to two of the other consignments, but to which we know not. (Our knowledge of the instructions relating to the November consignment is dealt with in paragraph 30 below).

One of the notes reads as follows:

"Itinerario

"Domenico 01274 743 773

01274 573 857

N.B. Per L'autista prova sempre prima al numero di Antonio

Warehouse: Mount Street Mills

Mount Street

Bradford

BD3 9RJ

Da "Dover" Seguire indicazione per "Datford Tunnel" c, M25 una volta sulla M25 uscire all uscita m 21A (NORD) che pozta sulla M1 NORD direzione LEEDS

Sulla M1 NORD uscire all'uscita M-42 che porta sulla M62 e una vocta li'prendere la direzione per MANCHESTER chiamita pure M62 WEST (Ovest) sulla M62 che pozta a Manchester Tzoverai BRADFORD - uscire a zaofarvi [?] e pre-veere a M606 che e'sola luw oa 31M. Quino una volta sulla M606 che e'sola M606 Fermati?!!!??! [sic]

Sulla corsia di emergezuza e contatta Antonio o Domenica

Antonio 07801 825287

Domenico 01274 743773"

The information we have shown as boxed does not appear so on the original. We have shown it in that way to indicate that it is in a different hand from the remainder of the note, and may or may not be contemporaneous with it.

We were provided with the following translation of the body of that note:

"Domenico 01274 743 773

01274 573 857

Note to driver: always try Antonio's number first.

From Dover, follow signs for Dartford Tunnel or M25. On M25, leave at exit 21A (North) which leads to the M1 (North), direction Leeds. Leave M1 North at exit 42, which leads to the M62. Once there, head for Manchester, also signed M62 West. On the M62 to Manchester, you will see Bradford. Take the Bradford exit and take the M606 which is only 3 km long. Then, once you are on the M606 stop on the hard shoulder ?!!!??! [sic] and call Antonio or Domenico.

Antonio 07801 825 287

Domenico 01274 743 773"

The body of the second note, being a photocopy of the first one, is, of course, in identical terms. But the information we have shown above as boxed on the first note does not appear on the second one.

The instructions on the two notes differ hardly at all from the instructions the Commissioners found with the CMR for the load detained on 21 March 2002; and despite our having no translation of the latter document, its content is plain.

By email of 17 May 2004 Frisinghelli also informed the Commissioners that TransItaly had attached a note to the documents relating to the November load instructing the driver "to contact while in the UK a Mr Domenico 01274 743773 or a mister Antonio mobile 07801 825287".

Mr Puzey observed that the boxed part of the note to the driver to which we referred in paragraph 26 above specified the delivery address as Montesole UK's premises. He submitted that there was no indication that the document was in any way untrue, false or a forgery. The instructions were simply addressed to the driver of that particular load: the only delivery address on any of the haulier's documentation was that of Montesole UK's warehouse. The contention proposed by Montesole UK that the intervention of Antonio or Domenico would involve a change in delivery address was unfounded: it could not be assumed that the hauliers would permit redirection of the load without any endorsement or record of to where the goods were in fact taken; TransItaly invoiced the haulage costs of the goods to Montesole UK (see the letter of 23 January 2003 at paragraph 50 below).

For the reasons we give in paragraph 51 below, we find that TransItaly did not invoice Montesole UK for the haulage costs. However one looks at the facts, it is plain that someone other than Montesole UK intended Antonio or Domenico to be involved in some way in the delivery process. And if that involvement were not to result in the delivery address of the goods being changed, what was to be its result? No obvious answer occurs to us. (It cannot be said that the hauliers were not aware of the possible involvement of Antonio and Domenico since it was Frisinghelli itself that brought to the Commissioners' attention the instruction to contact the two named persons in connection with the November load. Admittedly, we are not presently considering the November load, but the point is valid in relation to the other consignments).

With nothing to connect Montesole UK to Antonio or Domenico, against a background of three notes to drivers all in essentially the same terms, and the instructions to its driver disclosed by Frisinghelli, the evidence points to the goods consigned to Montesole UK, whichever loads they may have been in addition to the February load, having been diverted from Montesole UK or Harter Ltd to Bikram Singh, or possibly to an unknown third party.

The Commissioners made enquiries as to the identity of the persons whose telephone numbers were on the driver's instruction notes they found and the information which Frisinghelli gave them. They discovered the numbers 01274 743773 and 01274 573857 to be those of Domenico Pascale, an Italian living in Bradford who ran a coffee bar; and the number 07801 8252827 to be a mobile telephone number registered in the name of D A Pascale. We find Domenico Pascale and DA Pascale to be one and the same person. Neither Mr Piotrowicz nor Mr Pleasants knows Mr Pascale, nor have they ever had any business dealings with him.

The Commissioners interviewed Mr Pascale under caution. He denied that telephone number 07801 8252827 was or ever had been his mobile number, despite being informed that checks revealed it to be registered to Mr D A Pascale of 717 Great Horton Road, Bradford – Domenico Pascale's home address. It was also pointed out to him that the drivers given the phone numbers were to ask for Domenico or Antonio, and that the former was his own first name. But he still maintained that the number was not his. Of Antonio he claimed that a number of people so named frequented his café, and said that any of them could have been the Antonio referred to in the notes. He further denied that 01274 573857 was his home telephone number despite that number too being registered in the name of Mr D A Pascale, of 717 Great Horton Road. After some discussion, he accepted that the number 01274 743773 was that of his coffee bar, but claimed that it was a pay phone and thus could be used by any of his customers. It would appear, and we find, that his claim was never investigated by the Commissioners, so that we are unable to say whether or not the phone was a pay phone. We find that all three telephone numbers referred to in this paragraph were those of Domenico Pascale.

Mr Pascale further claimed in interview never to have heard of Montesole UK or of either Mr Piotrowicz or Mr Pleasants. Mr Pascale was also asked whether he knew Bikram Singh or Impex, to which he replied, "No, no". He also denied ever having been to Italy with Bikram Singh "with the intention of arranging the importation of wine".

Bikram Singh was also interviewed under caution. He admitted knowing Mr Pascale, saying "we worked together … in cleaning at the University": and claimed that the two went to Italy together, explaining that Mr Pascale "helped me set up Import Impex … because I don't speak Italian so he helped me". Bikram Singh claimed never to have "heard or even come across" Montesole UK, or to have any knowledge of Mr Piotrowicz or Mr Pleasants.

Neither Mr Pascale nor Bikram Singh gave evidence to us, but, having read both their statements carefully, we are in no doubt that Bikram Singh's statement, at least in relation to his knowledge of and relationship with Mr Pascale, bears all the hallmarks of truth, whereas that of Mr Pascale stands up to no examination whatsoever. In those circumstances, on the balance of probabilities, we accept the truth to be that advanced by Bikram Singh. We find that Mr Pascale could speak Italian, was known to Bikram Singh and helped him establish Impex, and travelled to Italy with him for the purpose of developing its business there.

Both Mr Piotrowicz and Mr Pleasants were also interviewed under caution. Throughout their interviews, they denied any involvement in or knowledge of the four importations prior to that of March 2002. In relation to their denials, for the moment we content ourselves by saying that nothing in the Commissioners' enquiries, whether into Montesole UK's records, finances, or any other aspect of its business revealed any direct evidence that its partners were so involved. We particularly record that the Commissioners' examination of Montesole UK's stocks revealed no wines included in the CMRs for the consignments prior to that of March.

Mr Puzey observed that no reservation or caveat had been entered on any of the CMRs to the effect that the place of delivery had been changed. We accept that to be so, but it does not mean that the place of delivery was not in fact changed. Viewed against the evidence of the three notes giving drivers instructions as to what they were to do on arrival on the M606, the instructions to the driver disclosed by Frisinghelli, and the denials of Mr Piotrowicz and Mr Pleasants of involvement in any of the importations, the lack of documentation as to a change in the place of delivery is hardly proof that there was no such change.

In or about September 2001, Montesole UK entered into an agreement with Bower Green Limited for the rental of some 1800 square feet of premises forming part of the Mount Street Mill in Bradford. It intended to use those premises as a warehouse and office in connection with its expanded business. To quote from Mr Pleasants' interview, "We needed a base". The rent agreed was £100 per week. The area rented was in excess of Montesole UK's needs, so that it intended to sub-let or licence space. It had two contacts requiring space: a waste wool business and Mr Piotrowicz's father, an importer of kitchenware. It also intended to garage its van in the mill premises, but found the doorway too small to allow the vehicle to enter. In the event, the proprietor of the waste wool business did store bales of wool in the warehouse. Montesole UK also used the mill to store wine on which it had paid duty and which was left over from continental markets. Montesole UK found the premises unsuitable for its purpose, so that after some six months it surrendered its lease or letting. It then arranged to rent a smaller area of storage accommodation at Manningham Mills, Bradford.

Mr Puzey submitted that Montesole UK's entry into the agreement to rent the Mount Street Mill premises and its REDS application, which both occurred in August or September 2001, were indicative of an intention by Montesole UK to store a large volume of alcohol on its own premises. He observed that Montesole UK, on the admission of its partners, did not need premises extending to 1800 square feet for its existing operation, and added that the coincidence of the arrival of the first consignment from Impex in September with the commencement of the rental agreement and the REDS application was an indicator that the large volume of alcohol specified on the September CMR was destined for the Mount Street Mill warehouse.

The old factories and mills of northern England are ill suited to the needs and requirements of twenty first century commerce. Frequently they are divided into units and let to small businesses. Their divisions often result in units of the most odd shapes and sizes. But as the rents charged are much lower than those for modern purpose built industrial units, businesses can afford to and do take leases of areas larger than they need. It is against that background that we consider Mr Puzey's submission.

In the instant case, it is plain that the partners in Montesole UK intended to continue to expand what was a small but seemingly successful business, and entered into the letting agreement of the mill premises to further that end. Clearly, they knew the premises to be too large for their needs; that is evident from the fact that they arranged with a wool business to store its bales of wool.

That the dates on which Montesole UK took possession of the building and subsequently vacated it more or less cover the beginning and end of the period of alcohol importations with which we are concerned, seem to us to be purely coincidental.

In our judgment, Montesole UK's entry into the rental agreement and its REDS application were simply to further its business needs and requirements. There was nothing sinister about them. We are certainly not prepared to interpret them as an intention to store a large quantity of illegally imported alcohol, illegality being implicit in Mr Puzey's submission.

The Commissioners found within Montesole UK's records two invoices relating to the hire of fork lift trucks, the dates of which appeared to them to correspond with the dates on which two of the importations prior to that of March 2002 took place, and to confirm that Montesole UK received them. On 12 September 2001, Montesole UK hired a fork lift truck from Delta Equipment Limited for a period ending on 12 October 2001. The truck was used at the Mount Street Mill. Montesole UK hired another such truck from Delta Equipment Limited on 8 February 2002, again for use at Mount Street Mill. It returned the truck on 13 February 2002. Before us, there is also evidence and, we find, that from time to time Montesole UK borrowed fork lift trucks from Bower Green Ltd for use at Mount Street Mill, but when or for how long we cannot say.

Montesole UK explained the hire and borrowing of the fork lift trucks as necessary to move both bales of wool "as high as the ceiling" and wine around its warehouse. In part, its explanation seems to have been rejected by the Commissioners due to their having found but a few bales of wool when carrying out an examination of the warehouse. That the invoices for the hire of trucks relate to only two periods which appear to coincide with Impex importations is hardly conclusive evidence of Montesole UK's involvement in the four importations prior to the March one.

Amongst Montesole UK's records the Commissioners found an Impex letterhead which Mr Piotrowicz said was handed to him at the Verona wine fair. In interview, Mr Pleasants admitted having faxed a copy of that letterhead to Mr Ferrario of the Italian Montesole on 11 July 2001. Whilst it was unusual for Montesole UK to have held an Impex letterhead, it is but another factor we must take into account in reaching our decision. Viewed in isolation, Mr Pleasants' acceptance that he faxed the letter prior to importations starting might appear important, but we must, and shall, view it in the light of all the circumstances.

On the basis of the contents of the following letter of 23 January 2003 from TransItaly to "Law Enforcement Investigation … Leeds", Mr Puzey submitted that Montesole UK paid TransItaly for transporting wine from Italy to the UK:

"Following your fax dated 15 January 2003, we want to specify that we provided transports destined to the firm MONTESOLE on behalf of the firm IMPEX IMPORT-EXPORT – 56036 PALAIA (Pisa) ITALY.

This firm gave us instruction to invoice the cost of the transports to the firm MONTESOLE, remaining responsible towards us about the relative payment of invoices."

The submission was made on the basis that the words "This firm" at the beginning of the second paragraph referred to Montesole UK. We reject the submission: in our judgment the words refer to Impex. That is entirely consistent with the remainder of the second paragraph of the letter and with the evidence of Mr Piotrowicz and Mr Pleasants. But more importantly, and in our view conclusively, it is confirmed by the fax from Frisinghelli of 14 January 2003 where, in response to the question "How did they [Montesole UK] pay for the transport?" from the Commissioners, Frisinghelli simply replied, "We got paid by TransItaly".

In Mr Barlow's submission the evidence strongly suggested that Bikram Singh and Mr Pascale were the importers of the goods on which Montesole UK had been assessed to excise duty and VAT, and that those persons had wrongly used Montesole UK's name for their own purposes. He explained that Montesole UK's case did not depend on its proving that Bikram Singh was the importer: it was at least possible that some unknown third party was responsible for using the names of both Montesole UK and Bikram Singh for his own purposes.

Mr Barlow particularly invited us to note that, in the statement of case, the Commissioners confined their allegations to claiming that Montesole UK was "in all probability the importer". He submitted that the Commissioners' choice of words was indicative of the weakness of their case: not only was the evidence weak, it was also entirely circumstantial. Mr Puzey, whilst accepting that the evidence was entirely circumstantial, maintained that that did not, in any way, detract from what he submitted were the compelling inferences that flowed from it: the tribunal's task was simply to determine whether Montesole UK was a party to the importations of alcohol or not.

There were, in Mr Barlow's further submission, significant gaps in the evidence which pointed to Montesole UK not having been involved in the importation of consignments of wine. First, he observed that when the officers visited Montesole UK's warehouse on 8 April 2002 they found not a single bottle of wine said to have been included in the four consignments prior to that of March. Mr Puzey's response was to acknowledge that no wine had been found, but to maintain that Montesole UK was capable of "moving on" significant quantities of alcohol very quickly. Secondly, Mr Barlow contended that the evidence of fork lift truck hire was "inadequate", and did not even cover all the relevant periods: Montesole UK had legitimate reason for the hirings. Thirdly, Mr Barlow submitted, and we have already accepted, that Montesole UK did not pay for the wine to be transported. Fourthly, and naturally following from the third point, Mr Barlow observed that there was no evidence of money having passed between Montesole UK and Bikram Singh. Again, Mr Puzey accepted the correctness of the observation, but added that one would not expect to see such evidence in relation to a venture of this type. Finally, Mr Barlow noted that no one ever sought payment of the goods in the March importation: someone was afraid to reveal themselves. Mr Puzey merely commented that it was a case of all the participants blaming each other. In our judgment, the significant gaps in the evidence referred to by Mr Barlow do point to Montesole UK not having been involved in the four importations of wine prior to that of March 2002, and not having taken delivery of it.

Two things stand out in the evidence before us as indicating that Montesole UK did not take delivery of the goods consigned to it prior to March 2002: the honesty of Mr Piotrowicz and Mr Pleasants, as tested not only in evidence but also by the Commissioners in their enquiries with the firm, and the fact of there being three notes (including that for the March load) containing instructions to the delivery drivers to contact Antonio or Domenico on approaching Bradford, plus an admission by Frisinghelli that it received similar instructions for its driver in relation to a fourth load. Even were we to disregard the honesty of the partners in Montesole UK, in our judgment the notes and Frisinghelli admission constitute evidence almost sufficient in itself to warrant our allowing the appeal.

In so saying, we do not disregard the remaining evidence – the circumstantial evidence, on which the Commissioners rely. On the contrary, we have carefully considered all of it. As we earlier explained, we do not find it unusual that Montesole UK rented premises larger than needed. The two rentals of the fork lift trucks, in our judgment, have been satisfactorily explained by Montesole UK. That leaves the faxing of the Impex letterhead by Mr Pleasants to Mr Ferrario. It might be capable of explanation, but even if it is not, we do not regard it in isolation as a matter of sufficient weight to warrant our dismissing the appeal. For instance, the Bradford connection between Montesole UK and Impex may have emerged at the Verona wine fair, and with a possibility of business interests of both being developed, resulted in Montesole UK being provided with a copy of an Impex letterhead.

Mr Puzey questioned why, if the importations were all a "set up" involving Mr Pascale, Impex contacted Montesole UK when the March consignment was detained by the Commissioners at Dover. The answer to that question seems to us self-evident: if the importations were fraudulent the last person to whom Impex would have wanted to draw the attention of the Commissioners was Mr Pascale. Not unnaturally, they would turn to the consignee, Montesole UK. We need not speculate as to what might have happened had an earlier consignment been detained, for that did not happen.

We do not consider it to be without significance that the December consignment included a coffee machine – a machine that would have had its natural place in a coffee bar, such as that run by Mr Pascale.

Mr Puzey also maintained that Montesole UK had failed satisfactorily to explain how Bikram Singh or Mr Pascale had obtained the Mount Street Mill address in order to consign goods there as early as September 2001 – very shortly after Montesole UK rented those premises and many months before it placed an order with Impex. Neither Mr Piotrowicz and Mr Pleasants was able to offer us an explanation, but we do not regard that fact as fatal to Montesole UK's case. It is plain to us that we are concerned with criminal activities in which, in our judgment, the Montesole UK partners were not involved.

Whilst maintaining that Montesole UK's position with regard to the last mentioned matter might have seemed far fetched, Mr Puzey contended that it was surpassed by its denial of having placed any orders for wine with Impex prior to that delivered in March 2002. He submitted that, as far as was known, Impex never traded with or supplied any other person or business. But in March 2002, Montesole UK placed an order for a quantity of wine with the very firm it maintained had been misusing its details: out of all the wine producers and exporters in Italy, Montesole UK had chosen to deal with that firm.

No evidence whatsoever was adduced to indicate whether Impex traded with or supplied any other person or business. In its absence, particularly as only the Commissioners would have had access to it, we are not prepared to find that Impex traded only with Montesole UK. The evidence clearly shows Mr Piotrowicz to have met an Italian representative of Impex at a wine fair, i.e. in the ordinary course of business. If Impex had products which were of interest to Montesole UK, there would have been nothing unusual in its placing an order for them, whether soon after the meeting or later. And such appears to have been the case when Montesole UK placed the order for 10 pallets of wine in March 2002. That it unfortunately did so with a firm which had been or might have been misusing its name, appears to us to have been one of those instances where truth was stranger than fiction.

All the evidence points to Domenico Pascale having been an employee or associate of Bikram Singh and the four consignments pre-March 2002 having been delivered to Bikram Singh. But we do not consider it necessary so to find.

We conclude that Montesole UK did not take delivery of the four consignments of goods prior to March 2002. Consequently it is not liable to the excise duty and VAT to which it has been assessed. We allow the appeal against the excise duty and VAT assessments and the penalty assessments fall away.

We also direct the Commissioners to pay Montesole UK's costs of and incidental to and consequent upon the appeal, such costs to be calculated on the standard basis, and to be determined by a costs judge of the High Court in the event that they cannot be agreed.

DAVID DEMACK

CHAIRMAN
Release Date: 7 November 2007

MAN/03/8129

THE SCHEDULE

The Excise Goods (Accompanying Documents) Regulations 2002 ("EGAD") provide as follows:

"Part IV – Imports under Community Duty Suspension Arrangements

11. Application of Part IV

(1) Subject to paragraph (2) below, this Part applies to imported excise goods.

(2) This Part does not apply to excise goods—

(a) to which Part V below applies (imports not under Community duty suspension arrangements), or

(b) to which Part VII of the Excise Goods (Sales on Board Ships and Aircraft) Regulations 1999 applies (simplified procedures), or

(c) imported in accordance with the arrangements described in Article 10 of Council Directive 92/12/EEC (distance sales), or

(d) to excise goods imported by a person for his own use.

Accompanying administrative documents for imports

Imported excise goods must be consigned to—

(a) an authorized warehousekeeper, or

(b) a REDS, or

(c) an occasional importer, or

(d) an ultimate destination outside the United Kingdom,

and must at all times be accompanied by an accompanying administrative document that complies with the Community provisions.

Excise duty point

(1) The excise duty point for excise goods to which these Regulations apply and in respect of which there has been a contravention described in paragraph (2), (3), or (4) below is the time specified in paragraph (5) below.

…

(3) For excise goods to which Part IV above applies (imports under Community duty suspension arrangements) the contraventions are—

(a) contravention of or failure to comply with regulation 12 above (accompanying administrative documents for imports);

(b) contravention of or failure to comply with regulation 13(1) or (3) above (accompanying administrative documents for imports—supplementary provisions);

(c) …

(d) delivery of the goods to a place other than the place for delivery specified in the accompanying administrative document; and

(e) …

…

(5) The excise duty point is—

…

(b) … the time the excise goods were imported.

Forfeiture

If in relation to any excise goods that are liable to a duty of excise that has not been paid there is—

(a) a contravention of any provision of these Regulations, or

(b) a contravention of any condition or restriction imposed by or under these Regulations,

those goods shall be liable to forfeiture."

The Customs and Excise Management Act 1979 ("CEMA") provides:

"49(1) Forfeiture of goods improperly imported

(1) Where—

(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being goods chargeable on their importation with customs or excise duty, are, without payment of that duty—

(i) unshipped in any port,

these goods shall … be liable to forfeiture.

139(1) Anything liable to forfeiture under the customs and excise Acts may be seized or detained by any officer.

141(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the customs and excise Acts—

(a) any ship, aircraft, vehicle, animal, container (including any article of passengers' baggage) or other thing whatsoever which has been used for the carriage, handling, deposit or concealment of the thing so liable to forfeiture, either at a time when it was so liable or for the purposes of the commission of the offence for which it later became so liable; and

(b) any other thing mixed, packed or found with the thing so liable,

shall also be liable to forfeiture.

152(b) The Commissioners may, as they see fit . . . restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts.

170B (1) If any person is knowingly concerned in the taking of any steps with a view to the fraudulent evasion, whether by himself or another, of any duty of excise on any goods, he shall be liable—

(a) on summary conviction, to a penalty of the prescribed sum or of three times the amount of the duty, whichever is the greater, or to imprisonment for a term not exceeding six months or to both; and

(b) on conviction on indictment, to a penalty of any amount or to imprisonment for a term not exceeding seven years or to both.

(2) Where any person is guilty of an offence under this section, the goods in respect of which the offence was committed shall be liable to forfeiture."

The Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 provide:

Person liable to pay the duty

(1) The person liable to pay the duty in the case of an importation of excise goods from another member State shall be the importer of the excise goods.

Movement requirements

Save as the Commissioners may otherwise allow, no person may import Community excise goods of a certain class or description into the United Kingdom unless—

(a) he is a REDS who has been registered in relation to excise goods of that class or description;

(b) . . .

(c) the goods are consigned to a tax warehouse which has been approved in relation to goods of that class or description; or

(d) he is in relation to the goods an occasional importer who has complied with the requirements of regulation 15 below.

Approval and requirements

Every occasional importer, in respect of each consignment of excise goods imported by him whether or not those goods are under duty suspension arrangements shall—

(a) before the excise goods are dispatched to him—

(i) inform the Commissioners that he is expecting the above-mentioned goods and shall supply such further particulars with respect to the consignment as the Commissioners may require;

(ii) pay the duty or provide a guarantee satisfactory to the Commissioners securing payment of the duty; and

(iii) furnish the consignor with a certificate stating that the duty has been paid or otherwise accounted for, or that the payment of duty has been secured to the satisfaction of the Commissioners.

…

(b) pay any duty that has not been paid in such manner as the Commissioners may direct.

The Finance Act 1994 provides:

Assessments to excise duty

(1A) … where it appears to the Commissioners—

(a) that any person is a person from whom any amount has become due in respect of any duty of excise; and

(b) the amount due can be ascertained by the Commissioners,

the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative."